How to qualify for audit exemption for your Singapore company ?

How to qualify for audit exemption for your Singapore company ?

The Accounting and Corporate Regulatory Authority (ACRA) is the national regulator of business entities, public accountants and corporate service providers in Singapore. ACRA also plays the role of a facilitator for the development of business entities and the public accountancy profession.

The Companies Act in Singapore introduced the concept of “small company” to exempt private companies that fulfill certain criteria from the requirement of annual audit. This helps the company reduce its operation and compliance costs. This audit exemption has been effective from the financial year beginning on or after the change in the law (1st July, 2015).

The small company concept is applicable to both existing and newly registered private limited companies in Singapore.

Previous Criteria for Audit Exemption

The Act states that every company (unless exempted) must get its financial statements and accounting records audited by an auditor on an annual basis. The auditor examines their records and provides an independent opinion about the fairness of the accounts.

Prior to the Amendment Act 2014, an Exempt Private Company with an annual turnover less than or equal to S$ 5 Million was exempt from having its accounts audited. An Exempt Private Company is a company that has less than 20 shareholders and no corporate shareholders. However, the criteria has changed in recent times. Now, any company defined as a “small company” will not have to conduct an annual audit of its accounts.

What is considered a “small company” ?

The Act states that a company is considered to be a small company if it meets at least 2 out of the following 3 criteria:

Total annual revenue of the company must not exceed S$ 10 million;

Total assets of the company for the financial year end must not exceed S$ 10 million;

Number of full-time employees at the end of the financial year must not exceed 50.

Besides private companies, group companies (holding and subsidiary companies) can also avail the audit exemption if they qualify as a small group per the criteria described below.

Group Company Audit Rule

A group company is defined as a holding company and its subsidiaries that together form a group due to a common source of control. A group company will be exempt from annual audit of its accounts if the holding and all subsidiary companies individually:

Fulfil at least 2 of the small company qualifying conditions and

Belong to a “small group”

To qualify as a “small group”, the group (comprising of all the companies) must fulfil at least 2 out of the following 3 conditions in the immediate 2 preceding financial years:

Consolidated revenue must not exceed S$ 10 million

Consolidated total assets must not exceed S$ 10 million

Total number of employees of the group must not exceed 50

This means that to qualify for the audit exemption, the individual subsidiary companies as well as the holding company, as a group, must fulfill the eligibility criteria of a small company.

Change in Company Status

Once a company acquires the “small company” status, it continues to enjoy the audit exemption benefit until the company is disqualified. Disqualification of a company occurs when the company:

Ceases to operate as a private company in the financial year or

Does not satisfy the “small company” qualifying conditions for the 2 immediately preceding financial years.

Transitional Provisions

A company incorporated before the changes in the Act can also qualify for the audit exemption if the company fulfil 2 out of the 3 qualifying criteria of a small company. Specifically, a company incorporated before July 1, 2015 can qualify as a small company if:

It is a private company and

Meets the qualifying criteria either in the 1st or 2nd financial year after the commencement of the small company criteria (i.e. July 1, 2015)

The following table explains the transitional provisions:

Conclusion

An entrepreneur setting up a business in Singapore must be aware of annual filing requirements and the exemptions that may be applicable to their company. A newly incorporated company, an existing company and a company that is a part of a group can qualify for exemption from the annual audit of its accounts if it qualifies as a small company. To check if your company complies with these conditions and can take advantage of this audit exemption, it is advisable to engage the services of a good corporate services provider.

We have reviewed hundreds of these service providers to help you make your decision. Check out their reviews here. You can also speak to us here at Incorporate.sg, we are always happy to help! Give us a call, email or chat live with us by simply clicking on the blue dialogue box on the bottom right hand corner of this page. Cheers!